Know The New No-Fault Priority Rules And Beware of Coverage Gaps

On June 11, 2019, the Michigan Legislature made sweeping changes to the no-fault act.  One of those changes is the order of payment priority for patients injured in motor vehicle accidents as motor vehicle occupants or pedestrians.

Under the old law, no-fault insurers would pay medical providers in the following order of priority:

1. the injured person’s own no-fault insurer;
2. the no-fault insurer of the injured person’s spouse;
3. the no-fault insurer of a relative living with the injured person;
4. the no-fault insurer covering the involved motor vehicle; or
5. the Michigan Assigned Claims Plan

Under the new law, the no-fault insurer of the involved vehicle is no longer in the order of priority.  Today, no-fault carriers must pay medical providers in the following order:

1. the injured person’s own no-fault insurer;
2. the no-fault insurer of the injured person’s spouse;
3. the no-fault insurer of a relative living with the injured person; or
4. the Michigan Assigned Claims Plan

The new law wholly eliminates the need to identify the no-fault insurer covering the involved vehicle, an often difficult task.  And if the patient or their household family members do not carry no-fault coverage, the claim must be submitted for payment to the Michigan Assigned Claims Plan (the insurer of last resort) through an application for benefits.

But here’s the rub.  While it may be easier to identify the proper insurer to pay the bill, that payment could be reduced (or not made at all) because benefits are exhausted.  This is because the coverage cap chosen by the person who purchased the policy applies to all persons entitled to benefits through that policy.  For example, if a patient is entitled to benefits from his uncle’s policy (because the patient has no coverage of his own and lives with the uncle), the patient’s benefits are capped at whatever amount the uncle selected when he purchased his policy.  This means that while there is now “choice” when no-fault insurance is purchased, your patients could be trapped by another person’s choice.

Also, most claims paid through the Michigan Assigned Claims Plan are now capped at $250,000, and the assigned-claims application process has become significantly more complicated and time-consuming.

Medical providers must move quickly to identify the correct insurer to bill and not wait long before escalating a denied or delayed claim to legal review.  Time is of the essence to locate and bill the proper carrier or to perfect a claim with the Michigan Assigned Claims Plan.  If you wait too long, benefits could be gone.

If you have questions about this or any other medical reimbursement issue, please contact any one of our provider reimbursement counsel.